May 25, 2018
Rejected by US, Germany is turning towards China...
We noted previous the rather warm and familiar meeting between Angela Merkel and Vladimir Putin in Sochi. She is now on an official visit in Beijing, prompting German commentators to ask whether Germany and China may become strategic partners in view of the fast process of deconstruction of the transatlantic alliance. We think not, but the very fact that they are asking this question is significant to us. Germany has made a number of single-issue bets on which its economy relies: the US security umbrella; the international trading system; the euro’s durability of course, the subject of many of our articles here; and the diesel technology. All of these are now under massive attack.
We like Joschka Fischer’s acidic observation in an interview with Spiegel magazine:
"My impression is that we are gradually realising that the "black zero" won't save us. [The commitment to a small fiscal surplus] doesn't endanger Europe, but it is holding up progress. We must transform our financial power into political power in the interest of Europe. It's no use just managing savings accounts, beancounter style. In this respect, my advice is to invest massively in Europe."
Heiko Maas, German foreign minister, was in Washington yesterday and had a really bad meeting there. Maas left the talks with Mike Pompeo, US secretary of state, and John Bolton, US national security adviser, worried about the transatlantic relations. He said the US and the EU would find it hard to compromise over Iran, and that the two had embarked on very different paths. The only support he got during his visit to Washington was from Nancy Pelosi, minority leader in the House of Representatives.
FAZ noted in an article that the EU is in a genuine dilemma. Iran is now asking the EU to increase oil purchases, and to insist that European banks will continue to fund business with Iran. Iran will otherwise withdraw from the nuclear deal. Maas is quoted as saying that German security interests were now at stake, but the journalists that accompanied him did not ask the question of why then his party does not support Nato's 2% military spending target.
Berthold Kohler, a FAZ commentator not normally lost for words, expresses genuine bafflement at the sight of Trump threatening tariffs on cars, and of Merkel and President Xi Jinping agreeing to preserve the multilateral trading system. We note that it is easy for the world’s largest and second largest exporters to agree to this because they are both dependent on countries like the US to run persistent trade deficits. Unlike China, however, Germany does not have a plan B.